EPF & FGV Shares

QUESTIONABLE EPF & KWAP INVESTMENTS IN FGV
EPF and KWAP are state controlled pension funds, which ultimately belong to the contributors
and the civil servants. The key purpose of these funds is to help depositors prepare for their
retirement. As such the government and the fund managers are under a much higher standard
of duty and care in their investment approach.
In the case of their investments in Felda Global Venture Holding Berhad (“FGV”) shares,
KEADILAN is of the view that both EPF and KWAP have a lot of explaining to do. As early as Aug
9th 2012, overall analyst views and recommendations on the stock had turned from positive to
negative, with buy recommendations disappearing fast. From that date to 4th January 2013,
despite the overall negative views on the stock and it falling share price, EPF continued to buy.
It added another 46 million shares to its portfolio. For the same period KWAP added 10 million
shares. The buying behavior of EPF and KWAP are extremely contrarian. This seems
unbecoming of a pension fund.
In addition, their overall forays in the open market from 29th June 2012 to 4th January 2013,
spending an estimated RM455m (EPF) and RM305m (KWAP) have resulted in an estimated
paper loss of RM40m for EPF and RM35m for KWAP.
KEADILAN believes that EPF holders and the civil servants have a right to know whether these
buys, a significant portion of which is against analyst recommendations and market views, are
politically motivated.
KEADILAN therefore demands EPF and KWAP to answer this question: did you ever receive any
implicit or explicit instructions from the government or any politicians to buy and support the
share price of FGV.

Here is the current score card:
EPF
 On listing of FGV, EPF had 185 million allotted shares.
 From 29th June 2012 to 4th January 2013, EPF increased its FGV shares by 90 million,
spending an estimated RM455 million.
 This is a big increase of 46% from its initial holding.
 These 90 million shares were acquired at an estimated weighted average price of
RM5.05.
 At the current price of RM4.60, the six months of trading has resulted in a paper loss of
approximately RM40 million.
KWAP
 On listing of FGV, KWAP had 194 million allotted shares.
 From 29th June 2012 to 4th January 2013, KWAP increased its FGV shares by 59 million,
spending an estimated RM305 million. PKR MEDIASTATEMENT

 This is a substantial increase of 35% from its initial holding.
 These 59 million shares were acquired at an estimated weighted average price of
RM5.19.
 At the current price of RM4.60, the six months of trading has resulted in a paper loss of
approximately RM35 million.
The immediate future does not look good:
Base case scenario?
Current average analysts target price for FGV is RM4.19.
If it continues to drop down to that level, EPF and KWAP would have paper losses of about
RM146m and RM129m respectively.
Worst case scenario?
If the price drops to the Alliance Research target of RM3.53 (the second lowest among the 12
most recent recommendations on the stock), EPF and KWAP would have paper loss of about
RM327m and RM295m.